With the exception of the Kiwi dollar which was undermined by a downgrade from the RBNZ’s inflation forecasts in its latest monetary policy statement, the Aussie fell against all major currencies, especially against a resurgent US dollar.

Rodrigo Catril, Currency Strategist at the National Australia Bank, put the declines down to another spike in US bond yields and weakness in most major commodity markets.

“US treasury yields are higher with the move led by the back end of the curve and the USD is stronger amid news of US Senate bipartisan agreement to avoid a government shutdown. A stronger USD and price declines in the commodity complex have not helped the AUD,” he said in his morning note.

“With a Thursday midnight deadline approaching fast, US Senate leaders announced a bipartisan two-year budget agreement that provides nearly $315 billion in additional funding. In theory, the plan also includes a suspension of the Debt ceiling, but the time period has not yet been agreed.”

While Catril says the agreement is far from a done deal, noting that “support from the US House of Representatives is mixed”, he says that helped to push US bond yields sharply higher, putting a rocket under the greenback.

“[The] US Senate bipartisan agreement to avert a government shutdown appears to have been the driver for the rise in yields and rebound in the USD,” he says.

“10-year US Treasury yields traded to an overnight low of 2.76%, but following the US Congress new a sell-off has ensued with yields now trading at 2.84%.”

The lift in US yields, along with sharp declines in most commodity markets aside from iron ore, weighed on the Aussie, seeing the AUD/USD fall to a session low of .7817.

It currently sits at the lowest level since January 10.

AUD/USD 4-Hour Chart

Turning to the session ahead, there’s a smattering of data releases scheduled in Asia, although none appear to have a meaningful impact on the Aussie, especially given recent market volatility.

Japan will release current account data for December at 10.50am AEDT. That will be followed a few hours later by Chinese trade data for January.

The latter may have some impact on the Aussie.

Later in the session, central bankers will take centre stage, including RBA Governor Philip Lowe who will deliver a speech to the A50 Australian Economic Forum at 8pm AEDT.

“If Tuesday’s statement is any guide, we suspect he is likely to deliver a reasonable upbeat assessment of the Australian economy,” says Catril.

Lowe’s speech also comes before the release of the RBA’s quarterly statement on monetary policy on Friday, a document that will contain updated economic forecasts from the bank.

Keeping Lowe in good company, the Bank of England will also announce its February interest rate decision at 11pm AEDT.

“We think the Bank will stand pat tonight,” Catril says.

“The new forecasts are likely to reflect an economy performing close to full potential [at] around 1.5%, [but] the inflation outlook will be the important piece.

“Language around the Bank’s potential concern over inflation not falling back to 2% quickly enough along price pressures from a tightening labour market should be watch closely for any hints on the timing for the next hike.”

Elsewhere, the ECB will release its latest Economic Bulletin while ECB Governing Council Members Mersch and Praet will also give speeches.

On the US Fed front, FOMC members Williams, George, Harker and Kashkari will also be in action.

In terms of data, highlights include German trade, Canadian house prices and US jobless claims.